Further supplementary memorandum submitted
by the Film Council
FILM BALANCE OF PAYMENTS
At the UK Film Council's evidence session to
the Culture, Media and Sport Select Committee on 24 June 2003,
Chris Bryant asked a series of questions (614-617) on whether
the UK was a net exporter or importer of film services. This note
seeks to clarify the position highlighted by Mr Bryant.
THE POSITION
Overseas trade in UK films and films services
is of relevance not only to the film industry but to all with
an interest in the prosperity of the UK economy. The most up to
date trade figures available are those for 2001, which show that
the UK film industry exported £700 million worth of services
in that year (£468 million in royalties and £232 million
in film production services), making a positive contribution of
£245 million to the UK balance of payments.
To answer the specific question of why film
exports have fallen from £888 million to £650 million
over the period 1995-2001, the ONS film trade statistics show
that the decline can be attributed to two categories: "royalties"
and "exports by UK subsidiaries of major US film companies."
Chart 1 shows UK film exports split between
royalties and film production:
Chart 1: UK Film Exports by Category of
Export, 1995-2001
Source: ONS, UK film and
TV industry 2001—import and export of services, 24 October
2002, Table 2.
As can be seen, film production exports have
been relatively stable and were as high in 2001 as they were in
1995-96. On the other hand, royalties dropped sharply between
1996 and 1997 and have subsequently recovered to a limited extent.
9 July 2003
Chart 2 shows UK film exports split between
UK subsidiaries of major US films companies and other companies
(i.e. UK companies and subisidaries of overseas companies other
than US majors). The export decline has occurred exclusively in
the "UK subsidiaries of US majors" category.
Chart 2: UK Film Exports by Category of
Company, 1995-2001
Source: ONS, UK film and
TV industry 2001—import and export of services, 24 October
2002, Table 3.
THE IMPACT
OF THE
APPRECIATION OF
STERLING
Analysis of these figures is somewhat complicated
by the appreciation of Sterling over the period in question. On
average, Sterling appreciated by 17% between 1996 and 2001, with
the increase concentrated in the year 1996-97.[11]
When Sterling appreciates, this has the effect of lowering the
Sterling value of both imports and exports (assuming foreign market
prices are held constant). It is likely that this effect is at
work in the figures for UK film exports and imports.[12]
Not only did the value of film exports drop sharply in 1996-97,
coincident with the rise in the value of Sterling, but the value
of film exports also decreased: from £652 million to £525
million. It is because the value of film imports also dropped
over the period 1995-2001 that the film trade surplus has remained
high, as noted in Point 2, above. Of the difference between exports
of £888 million in 1996 and £700 million in 2001, the
Sterling appreciation effect would account for about £127
million (assuming foreign market prices are held constant), leaving
a residual of around £61 million.
CONCLUSIONS
In conclusion then, it would seem that the fall
in film exports between 1995 and 2001 can be attributed to a combination
of the rise in the value of Sterling and a fall in royalties from
the overseas sales of film rights. It is also of interest that
the whole of the export fall is attributable to the "UK subsidiaries
of major US companies" category.
Despite this decrease in film exports, it should
be noted that the trade balance has fluctuated from year to year,
but was higher in 2001 than it was in 1996, and so would
not support an argument that there had been any general weakening
in the international position of the UK film industry.
7 July 2003
11 Bank of England Quarterly Bulletin, Summer 2003,
p 174. Back
12
The effect described here is purely an accounting effect. It
is also possible that a higher value of Sterling could deter some
film production activity from coming to the UK on the grounds
of cost. However, this is not apparent in the relatively constant
figures for export film production. Back
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